HOA Boards make errors. Sometimes, this is because they make the mistake of not hiring a skilled HOA attorney to save on costs or perhaps they are acting on poor legal advice. Whatever the reason, it is important to be aware of the most common complaints made against HOA’s so these pitfalls can be avoided.
Pitfall #1: Selective Enforcement
Associations that do not properly enforce their governing documents in a consistent manner run a risk that they will lose their ability to enforce them when they elect to do so. In such a situation, when an Association takes action against a homeowner in an effort to enforce the Association’s governing documents, the homeowner may defend the action by contending that the Association is acting in bad faith and is selectively enforcing its governing documents by seeking enforcement against the homeowner when it has not do so for other homeowners. If that is the case, a court could find that the Association has, by its conduct, waived the right to enforce the provision in question. Thus, if the Association’s board of directors elects not to enforce certain rules in one situation, it must be prepared to allow other homeowners in similar situations to disregard the same rules. To avoid selective enforcement defenses, Associations should be mindful of the controlling court decisions in this area, which provide: 1. the Association must act reasonably; 2. the Association must exercise its power in a fair and nondiscriminatory manner; 3. the Association must refrain from pursuing enforcement actions in an arbitrary or capricious manner; and 4. an Association’s board of directors has discretion in connection with enforcement proceedings and does not have a legal duty to enforce each and every violation of its governing documents.
Pitfall #2: Discrimination
Homeowner association boards are often unaware that they are legally responsible for ensuring that the HOA’s policies and practices do not result in discrimination against owners or renters, who live within the association’s boundaries. Specifically, boards have a duty to comply with California Government Code 12955, which says “It shall be unlawful for the owner of any housing accommodation to discriminate against or harass any person because of the race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, or disability of that person.” The duty of boards extends to the policies and practices of vendors they hire, for example, to the practices of property managers.
Pitfall #3: Improper Board Meeting Procedure
Homeowners are entitled to 4 days’ notice and an agenda for all open association meetings. If an executive session is held at a separate time, homeowners must be informed at least two days before the meeting. No owner notice is required for emergency meetings (Civil Code Section 4920). Homeowners may attend and address the board at open meetings at the time and in the manner established by the board (Civil Code Section 4925). There are penalties in the statute including $500 fines for failure of the board to comply.
Pitfall #4: Failure to Allow Inspection of Records or to Provide Required Disclosures
Homeowners may inspect many of the financial and other records of the HOA, although they have to pay the direct costs to produce the records for inspection (costs for copying and postage). If a homeowner requests the redaction of information that is private or could lead to identity theft, they must pay for those costs as well (Civil Code Section 5205(a)(f)(g)). There are penalties in the statute including $500 fines for failure of the board to comply. Homeowners are also entitled to annual and other disclosures, which include: rules, fines, financials, budgets, reserves (including component list and funding plan), meeting minutes, assessments, insurance information, architectural procedures, and collection policies. Homeowners should also receive notices of dates, times and agendas of association meetings. (Civil Code Sections 4950(a), 5300, and 5520), and are entitled to distribution of the balance sheet and income and expenses for the prior fiscal year within 120 days of the end of the fiscal year. (Civil Code 5300).
Pitfall #5: Failure to Update CC&R’s to Reflect Current California Law
Many CC&R’s we review were recorded before 1985. This means they pre-date the Davis Stirling Act, which was reorganized and recodified in 2012. The CC&R’s should be regularly audited and updated and amended to conform with current case law. An example is a CC&R that prohibits pets. Current California law states that no governing documents (including operating rules) passed or amended after January 1, 2010 may prohibit an owner from keeping one pet, subject to reasonable rules and regulations of the association. (Civil Code 4715). This does not mean a resident can keep a dangerous dog or nuisance pet on premises. New laws are also in effect with regard to solar installations, satellite dishes, clotheslines, electric car charging stations, drought resistant plants, and more. The CC&R’s should not conflict with current laws and the Board should not be enforcing now unlawful CC&R provisions.